2012 (7) TMI 612 - AT - Income Tax

Disallowance of claim under section 80IB of the Act - assessee has failed to establish beyond doubt that there is no other activity other than manufacturing activity - assessee had admitted trading activity and of undertaking job work apart from manufacturing activity - Duty drawback receipts and DEPB benefits do not form part of the net profits of eligible industrial undertakings for the purpose of the deduction under section 80-I / 80-IA / 80-IB of the Income-tax Act, 1961 - Profits derived by way of incentives such as DEPB/Duty drawback cannot be credited against the cost of manufacture of goods debited in the profit and loss account and they do not fall within the expression profits derived from industrial undertaking under section 80-IB - profits and gains in question cannot be said to have been derived from the industrial undertaking and, hence, the assessee would not be eligible for relief under section 80IB of the Act - assessee s appeal is dismissed.

Summary

Issues:
Appeal against deletion of addition under section 80IB of the Income Tax Act for deemed income assessed under section 69A and 69C.

Analysis:
1. The Commissioner (Appeals) granted relief to the assessee by allowing deduction under section 80IB based on the admission made by the assessee regarding undisclosed income, stating that the amount in question pertained to manufacturing activities eligible for deduction.

2. The Revenue challenged the Commissioner's order, arguing that the assessee failed to prove that the income was solely derived from the industrial undertaking, as evidence showed income from trading and job work activities as well.

3. The Revenue emphasized that the burden of proof lies with the assessee to show eligibility for exemption, which was not adequately demonstrated in this case.

4. The assessee contended that the entire addition was based on a statement, which was not disputed by the Revenue, and that the Assessing Officer did not doubt the nature of the assessee's activities.

5. The Tribunal analyzed the facts and held that the profits and gains in question could not be considered as derived from the industrial undertaking, citing relevant legal provisions and precedents. Therefore, the assessee was deemed ineligible for relief under section 80IB.

6. The Tribunal distinguished various case laws cited by both parties, concluding that they did not support the assessee's claim for deduction under section 80IB.

7. Ultimately, the Tribunal agreed with the Revenue's submissions, reversed the Commissioner's order, and restored the Assessing Officer's decision, dismissing the assessee's appeal.

This detailed analysis of the judgment highlights the key arguments presented by both parties, the Commissioner's rationale for granting relief, the Revenue's challenges, the legal principles applied by the Tribunal, and the final decision rendered in the case.